Idea Cellular, Vodafone India announce merger

New Delhi, March 20 (IANS) In one of the biggest mergers in the telecom space, Vodafone India and Aditya Birla Group-promoted Idea Cellular on Monday announced their much-awaited amalgamation.

Kumar Mangalam Birla, Chairman of the Aditya Birla Group, will also be the Chairman of the merged entity.

Idea Cellular in a regulatory filing on Monday said its Board of Directors “has approved the scheme of amalgamation of Vodafone India Limited and its wholly owned subsidiary Vodafone Mobile Service Limited with the company (Idea)”.

The merger will create an entity with over Rs 80,000 crore revenue.

Vodafone will own 45.1 per cent of the combined company, said Idea in a statement.

“Vodafone will own 45.1 per cent of the combined company after transferring a stake of 4.9 per cent to the promoters of Idea and/or their affiliates for Rs 38.74 billion in cash concurrent with the completion of the amalgamation. The promoters of Idea will hold 26 per cent of the company and the balance will be held by the public,” the statement said.

“The Aditya Birla Group will then own 26 per cent and has the right to acquire more shares from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time,” it added.

The merged entity will have around 406 million subscriber base, which is higher than Bharti Airtel’s 269 million customer base now. The combined entity will have 35 per cent customer base and 41 per cent of revenue market share in India.

“For Idea shareholders and lenders who have supported us thus far, this transaction is highly accretive, and Idea and Vodafone will together create a very valuable company given our complementary strength,” said Kumar Mangalam Birla, Aditya Birla Group Chairman.

“The combination of Vodafone India and Idea will create a new champion of Digital India founded with a long-term commitment and vision to bring world-class 4G networks to villages, towns and cities across India,” said Vittorio Colao, Chief Executive, Vodafone Group Plc.

“The combined company will have the scale required to ensue sustainable consumer choice in a competitive market and to expand new technologies — such as mobile money services — that have the potential to transform daily life of every Indian,” he added.

Both Idea Cellular and Vodafone India are present in all 22 telecom circles in India and have 4G connectivity in 17 circles.

Reacting to the development, Rajan S. Mathews, Director General, Cellular Operators’ Association of India, said these consolidations are positive steps for the industry.

“This trend of mergers and consolidation, will, however, remain a positive development, benefiting customers, operators and the government in the long run on global lines,” he said.

“The need of the hour, however is, a predictable, stable, long term, regulatory and policy environment, to ensure the financial health of telecom service providers and a conducive environment for continued investments for a fully connected and digitally empowered India,” Mathews said.

In India earlier, there were 13 operators, as opposed to the present of four or five operators.

“Consolidation is a much anticipated and very welcome development in this beleaguered telecom sector. It will help bring in operational efficiencies and improved quality of service to customers,” said Arpita Pal Agrawal, Partner and Leader- Telecom, PwC India.

She added, “The regulatory regime will have to ensure that benefits of effective competition continue to be availed by customers.”